tv Nightly Business Report PBS November 9, 2010 6:30pm-7:00pm EST
>> susie: it's the go-go days for gold. the yellow metal is shining at new highs, sitting firmly above $1,400 an ounce. why all the attention? analysts say it's all about demand. >> i don't believe its a bubble. i believe that we've suddenly come upon a new plateau for a new type of investments. >> jeff: gold's not the only commodity surging. silver, soybeans and cotton headed higher too. we'll look at what's behind the surge. you're watching "nightly business report" for tuesday, november 9. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
>> susie: good evening everyone. tom hudson is off; jeff yastine joins us tonight. and jeff, it's record time in the markets. not stocks, but gold prices. and silver, platinum, and most other commodities. >> jeff: susie, it's now four days in a row that gold continues to hit new records. today it closed at $1,410 an ounce. silver soared 5.5%, a new 30- year high, and platinum rose to its highest level in more than two years. >> susie: the forecast is for even higher prices. so what's going on? scott gurvey reports. >> reporter: the dollar goes down. gold goes up. its a standard rule of investing. but how does that explain corn and copper? crude and palladium? and even eggs. there actually are connections. start with the fed, buying securities to stimulate the economy. that lowers the value of the dollar, increasing the cost of commodities priced in dollars.
it increases demand as well, as foreigners flock to buy cheap u.s. exports, especially of corns and beans. that's not good when poor weather is leading to smaller harvests. and you may recall the egg recall. you need palladium and other metals to refine oil. and corn made into ethanol improves fuel efficiency. commodity expert george gero says wall street is also playing a part in the commodity rally. >> now we have all these perfect storms coming together. and asset allocation has become a new word on wall street in the last two years. and then you've had the advent of all these e.t.f.s, exchange traded funds. >> reporter: e.t.f.s have changed the investing equation. now endowment funds, pension funds and mutual funds, banned from buying futures contracts and commodities, are buying exchange traded funds which in turn, are buying futures and physical commodities. fund manager doug groh says individuals can buy too.
>> i don't think it's too late, but i think you want to do it in incremental steps. you want to add to your position over time. and what we generally recommend is that maybe 5%, or up to 10%, of a portfolio is invested in gold or gold-related products. that seems to be a reasonable approach over the long term. >> reporter: commodity prices have soared so high so fast there are fears a pullback is inevitable. but many say expanding development in countries like china and india guarantee long- term demand. >> i don't believe it's a bubble. i believe that we've suddenly come upon a new plateau for a new type of investments. i think as long as you asset allocate, it will be very good. >> reporter: and many experts say investors should take advantage of any sell off. >> there is a trading opportunity there, perhaps where you see maybe a 5% selloff for the metals, but i think that the fundamentals are still very strong over the long term because of the action on the dollar primarily, and because of
the recovery of the global economy. >> reporter: the threat of even higher commodities had livestock producers and farmers suing uncle sam today. they want to block a government decision allowing more ethanol in gasoline, which they claim would push things like food prices higher. scott gurvey, "nightly business report," new york. >> jeff: here are the stories in tonight's n.b.r. newswheel: as commodities prices surged, stocks saw modest selling. the dow fell 60 points, the nasdaq was off 17 and the s&p 500 fell nearly ten points. trading volume rose from yesterday's levels on both the n.y.s.e. and the nasdaq. another sign of weakness in the job market: the labor department says the number of help-wanted signs fell sharply in september, down over 5%. employers advertised for 2.9 million job openings during the month, a drop of 163,000 from august. a surprise jump in wholesale inventories, up 1.5% in september.
the commerce department says september's move matched july's, which was the biggest gain in two years. economists say the increases suggest output will remain soft as wholesalers try to trim inventories. still ahead, tonight's "word on the street" is "holiday retail." thestreet.com's bob walberg's making his list and checking it twice. he joins with a preview of retail winners this holiday season. >> susie: a new congress will soon arrive in washington, and one of the main issues they'll tackle is government spending. newly elected republicans are promising to put a long list of programs on the chopping block. but as darren gersh reports, finding ways to save might be tougher than anticipated. >> reporter: republican leaders may sound like they are about to slash government spending, but measured against the giant budget deficit, their plans look more like a trim. >> cutting $100 billion out of the deficit would reduce the deficit by about 6%.
it comes to about 3% of the total cost of government. it's not a huge difference, but it is a start. >> reporter: prime targets for cuts in the new congress include: repeal of $60 billion in unspent stimulus funds. a cut in pay and in the number of for federal workers and other so-called "across the board" cuts. though across-the-board doesn't apply to defense, social security, health spending, and other spending which budget expert joe minarik says add up to 80% of the budget. >> so you're looking at the other 20%, and at that point, you start going item by item. and lo and behold, there are things in there people care about. >> reporter: republicans have also targeted the obama health care law for repeal. but there are just two problems. one, they don't have the votes to do it. and two, that would raise the budget in the short run. >> the provisions republicans talked about removing generally tend to be provisions that save money. so if you cut those out, what
you might wind up with is actually a higher deficit rather than a lower one. >> reporter: but conservatives like riedl think there will be an effort made to get around the budget math. >> most people believe that obama care will actually run deficits over the first decade, so repealing it would help the budget situation. >> reporter: riedl does not expect budget cuts will come easily. which is why he thinks republicans may act when the country runs up against the debt limit this march. riedl says the threat of default could be the lever that forces cuts. >> it may scare the market if they believe there's a chance the government could default. i don't anticipate that happening, but there will be some real negotiations between the congress and the white house on how to attach spending reforms to this debt limit increase. >> reporter: the new congress' job is made more difficult by the mixed message sent in polls. about the same number of voters said congress should spend money to create jobs as said congress should reduce the deficit. darren gersh, "nightly business report," washington.
>> susie: another issue for the new congress? health care. republicans have pledged to repeal president obama's landmark healthcare law. so how does the managed care industry feel about this? earlier today i talked with david cordani, c.e.o. of cigna-- the nation's fourth largest insurance company. i asked him "does it make sense to repeal the health care bill, and start over?" >> given we spent the better part of a year as a country building up to this point where the law is in place and we're already implementing aspects of the law, i don't think it's in society's best interest to focus a significant amount of attention. rather we should move forward to a principal based dialogue and focus on improving clinical quality and sustainable costs for the benefit of health care going forward. >> susie: what we're seeing now are these efforts in congress to repeal the law, and at the same time we're seeing efforts by the obama administration to implement the law.
so how is cigna preparing for this? what is your strategy? >> sure. so we obviously are focused on being compliant with the law, because aspects of the law went in place in 2010. secondly we're working collaboratively with leaders on both side of the aisle in both houses around both the implementation of the law and further evolution to the law, legislatively and from a regulatory standpoint. ultimately we're focused on making sure we're delivering the best possible value for the benefit of our customers. so we're focused on all three, not just one. >> susie: are there any portion of the current health care law that cigna will try to help to repeal? >> repeal us a challenging word. to build on and modify. the items most important is to get to an effective cost and quality environment. so evolving the legislation that focuses on paying for clinical quality for the benefit of a customer or patient, not just for the quantity of services, that's an important part of what needs to be bit upon as we go
forward. providing more transparent sit and choice for individuals is an important part of what we need to build on, and making sure we manage the taxes that are built into this legislation, not to help increase cost but actually reduce costs as we go forward. >> susie: there are many who say that the republicans will not succeed in repealing the law at this time. but there are indications that over the next two years they will make a strong case to repeal certain aspects of the health care law. in particular they are, there are suggestions the individual mandates which requires all americans to buy health insurance. if that were to happen, what impact would that have on cigna and also on your industry? >> first, from a cigna point of view this is not a partisan issue. so from a republican point of view versus democratic point of view i think is a bit dangerous. to the core of your question, though, the law was put together with many building blocks and it is somewhat dangerous to remove
an individual building block from the law without stepping back and looking at the law in total. so as we move from this repeal and replace dialogue to amending and approval proving, we neither need to build on it, or stop and recognize that what we have is not working. but it's a dangerous path to remove individual components from the law without understanding the impact on the consumer, the physician, and ultimately sustainable costs. >> susie: as you look at the political landscape over the next two years what would you like to see happen? >> the most important thing we'd like to see happen is to make sure that this dialogue evolves from a partisan dialogue with a rather large void in the aisle in congress to a principal based dialogue. because what we all agree on is that as a society we need a sustainable health care system that long outstand an elected official or a business leader, but concerns generations to come. so our elected officials need to
focus on sustainable health care reform, which is access expansion. we've done a good job of that with the current legislation, but in unless we address quality improvement and sustainable cost the access expansion won't be affordable. >> susan: realisticly what do you think will happen? >> i, i'm cautiously optimistic that as we get through the early part of 2011 and the current congress settles in a bit, i do think there will be a lot of activity. there are some forward looking leaders on both side of the aisle who understand that for this access expansion to be sustainable, cost and quality need to an dressed. >> susie: certainly a conversation to be continued. but mr. cordani, thank so you much for your time today. >> thanks for having me.
>> jeff: the major averages encountered more resistance today, after recently touching two-year highs. investors were on the defensive. financial stocks bore the brunt of the selling; there's no better place to see that than the financial e.t.f. it saw a nice spike last week, anticipating the fed's new easing regimen. it gave part of those gains today, with lawsuits over foreclosure practices providing a nice excuse to do some selling.
as scott gurvey mentioned, commodities, and especially precious metals gold and silver, notched intraday highs. the growing divide among some global leaders over the fed's upcoming bond-buying binge has touched a nerve, sparking worries about the residual effect of a weaker dollar. and ultimately, all roads lead to gold. the front month december contract climbed as high as $1,421 before settling back to $1,410 an ounce on comex today. on the merger front, energy giant chevron taking aim at a big natural gas player, atlas energy. the company has vast holdings in the marcellus shale, spanning the northeastern u.s. this morning, chevron offered to buy nat-gas producer atlas energy for $3.2 billion in cash, or $38.25 per share. it also offered investors just over $5.00 per share in units from atlas pipeline's limited partnership.
plus the assumption of over $1 billion in debt. here is a chart of atlas, which vaulted to a 28-month high. with nat gas prices at hovering at rock bottom, the news triggered a rally in out-of- favor nat gas producers. here you see range resources, cabot oil and gas and rex energy, all posting decent gains. major energy players expect to recoup and benefit from growth in the years ahead. netflix was among the marquee names in today's trading, on news it may be on the verge of naming a new primary content network. shares in akamai slid nearly 5% on a report from the web site "business insider" suggesting it could be in danger of losing that title because of poor service. but netflix denied it was dropping akamai's service. both limelight and level 3 bolted higher on the prospects for any potential changes at netflix.
just last week, netflix agreed to extend rival limelight network's contract through 2013. this fueling speculation limelight's in a sweet spot to replace akamai. taking a pause now for news on tivo. shares falling nearly 15% to a one-month low as its corporate lawyers argue in appeals court to convince a panel of nine judges to hold dish networks and echostar in contempt for selling newer digital video recorders that still infringe its patents. the move allegedly violates a court-ordered injunction barring previous models from being sold. and that's tonight's market focus.
>> jeff: many retailers already have their christmas decorations up, but after two years of disappointing holiday sales, are shoppers ready to start buying again? tonight's "word on the street?" "ho-ho-ho" as in holiday retail. bob walberg is the chief market strategist at thestreet.com, and bob, what do you think of this year's holiday sales? will they fare any better? >> i really think they will, jeff. i think you're looking at an improvement in-house hold savings, a slight pickup in consumer confidence. both of those things bod e well for the holiday season. i think you'll see a pickup in retail sales between 2.5 to 3%, which is a little stronger than the 2.23 predicted by the national retail federation. >> jeff: and a lot better tonight last two years. you've made a list of the retail winners you're watching for this holiday season. what's your first stock? >> i think there's a couple
themes you want to play, one of thosees discounting. if you look at the discounters, costco is probably the best buy at current levels, costco hitting on all cylinders, every segment within its business is seeing solid improvement with the potential exception of the electronic division. i also think costco will benefit from its international sales which make up about 24% of total. so costco right around 63 64 bucks a share, we see up side to the mid 70 level. >> jeff: so still some movement there for the holiday season. tell us what your next stock is, abercrombie and fitch? >> yes it's a play on what we see is the pickup in teen spending. abercrombie and fitch has been one of the hall 345rks of that sector and we see solid improvement there at the management level in terms of controlling stores, square footage, and pricing. so we see them having a solid christmas season, and the stock rallying from the mid 40s into the mid 50s. sgrefz your third one is yet
another retailer? >> yes, it combines the benefit of discounting and teens and that you're going to see some of the strength they have in selling games. i think they're one of the must-have products this year, they'll be selling the x box 360. spent a time myself over the weekend, couldn't find it in any store. so i think that will be a driver driving stock from right around 20 bucks a share to around 25. >> jeff: i have 20 seconds or so. you don't have any online retailers on there. why not? >> valuations is the reason. right now you've seen the stocks take off. >> jeff: any disclosurees? >> we don't own any of those stocks. >> jeff: you can read bob's article on at the street.com and also a link on our website. thank you for joining us. >> thank you, jeff.
>> susie: here's what we're watching for tomorrow: quarterly results from burger king, cisco systems, general motors, macy's and sara lee, along with reports on the u.s. trade deficit for september and weekly jobless claims. also tomorrow, the finer things in life. you might think in this weak economy, luxury goods would not sell well. guess again! we'll look at who's doing the buying. more fallout for goldman sachs over its controversial "abacus" transaction. goldman will pay a $650,000 fine for taking seven months to reveal two of its brokers were being investigated by the securities and exchange commission. the financial industry regulatory authority, or finra, said the bank should have disclosed that information within 30 days. one of those brokers was fabrice tourre. you'll remember he was at the center of the s.e.c.'s "abacus" fraud case against goldman. >> jeff: a conspiracy in the sky? that's what the european union says. today it levied over $1 billion
in fines on 11 airlines for fixing prices on international cargo shipments. the e.u.'s business watchdog said the airlines illegally coordinated fuel and security fees following the 2001 terrorist attacks. air france received the biggest fine, nearly $0.5 billion, followed by british airways and s.a.s. group.
>> susie: the midterm elections may be over, but tonight's commentator says don't be surprised if mixed messages about the economy continue on capitol hill. she's maya macguineas, director of the fiscal policy program at the new america foundation. >> the one clear message coming out of this election was...? nothing. i am so tired of hearing "the one clear message" statements, with people claiming that the message was whatever they wanted it to be. the mandates from this election were so garbled because the country is at one of the most complicated crossroads we have been at in decades. the level of uncertainty is so high, and the truth is, no one knows exactly how to fix the economic and fiscal messes we are in. one of the truly fascinating things to come out of the exit polls was that 39% of the electorate wants the government to spend less and reduce the deficit, and nearly that many want the government to spend more to create jobs. crazy right? except that it's not. in this case, the mixed message is exactly right.
what we need is to spend more now and, at the same time, plan on spending less after we are finished spending more. see? the economy is still producing too little and the jobs are too few. government should spend more-- or cut more taxes-- temporarily to help fill in the gap. but at the same time, our massive federal debt casts a huge shadow of uncertainty over everything. unless we also pass a comprehensive budget plan to put our budget back on a sustainable path over the next decade, markets will remain skittish and the uncertainty will persist. so with as a complicated a situation as we are in, mixed messages and nuanced policy responses make sense. so there you have it. politicians, please listen to the voters and spend more, and then spend less. i'm maya macguineas. >> jeff: finally, adios to mr. goodwrench. general motors has given the mechanic his walking papers. he'll be phased out starting in february. mr. goodwrench started in 1974 to give a common service
identity for dealers and brands. but now, the automaker's emphasizing its four remaining auto brands and minimizing the fact g.m. owns them. so susie, next year service customers will be treated to chevrolet, buick, g.m.c. or cadillac certified service. but mr. goodwrench is a lot more fun. >> susie: people relate today those chevrolet brands instead. >> jeff: that's right. that's "nightly business report" for tuesday, november 9. i'm jeff yastine. good night everyone. >> susie: got nid, jeff. thanks for watching, everyone, and we hope to see you again tomorrow night. "nightly business report" is made possible by:
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